Payoff low interest loans??

**viking112347** · 08-28-2011, 02:07 AM

Wife has student loan at 3% (13,000 left) and we have 1 car loan at .9% (19000 left). I have $70,000 in savings, contribute max to 401K, Roth IRA, contribute to 529 plan for 2 little ones. Given this crazy economy and the way companies are laying off people I think I should continue shoving $ in to bank and not pre-pay these low interest loans.

What do u guys think??

**mh3rdwheel** · 08-28-2011, 05:36 AM

Originally Posted by viking112347

Wife has student loan at 3% (13,000 left) and we have 1 car loan at .9% (19000 left). I have $70,000 in savings, contribute max to 401K, Roth IRA, contribute to 529 plan for 2 little ones. Given this crazy economy and the way companies are laying off people I think I should continue shoving $ in to bank and not pre-pay these low interest loans.

What do u guys think??

continue putting money into the bank and also pay on the loans. When you prepay on loans what do you mean?

I will get back to you later I am off to work till 3 p.m. it is now 5:35 a.m.

Bye for now

**Russ** · 08-28-2011, 08:23 AM

Ask yourself this: Are you making 3% on all your investments?

That $70K, is that the total of savings, 401's, 529's, etc, or is that just a plain old saving acct?

**khaski** · 08-28-2011, 09:05 AM

If your $70k would cover at least 6 months of living expenses then you should just pay the debts. If you feel you need to keep building savings you can do both as suggested above. Of course, if you're following Dave ramsey you would take the money from savings and pay both off in full.

**Mojjo** · 08-28-2011, 09:28 AM

I agree, if you've got 6 months covered then pay down the debt as much as possible. If you pay it down then the 6 months of expenses go down too.

I know the economy is stable, but are you in a career where lay offs or unemployment is a real threat or are you relatively stable. We're relatively stable so I'm trying to pay everything off as much as possible. Having no debt makes this unstable economy a little less frightening.

**Lady_V** · 08-28-2011, 10:29 AM

Personally... I'd pay them off since you have a decent nest egg.

If anything happened to your job, you would be paying off normal debt AND "back debt".

The sooner I get "back-debt" out of my life, the more secure I feel.

**nuisance26** · 08-28-2011, 01:21 PM

~I would pay down the 3% interest debt. Not all at once, but with whatever extra you can throw at it every month. Your .9% interest debt is costing you less than you're probably making on keeping that $19K in the bank. I get 1% interest in my savings account right now. Lean, but better than .9%, right? If you have money in CD's, you're definitely better off keeping the money there at 2-4% interest.
You have enough savings to ride out a few years of lean times should they occur. Not having debts during a time like that would greatly reduce the stress.~

**Telephus44** · 08-28-2011, 01:36 PM

I agree with you. Not sure if you're trying to follow DR (this is the DR forum) or not, he would advise you to pay off all the debt ASAP.

My personal plan, I don't prepay low interest debt. Depends on your personal situation, but it can work out better for you.

**Greebo** · 08-30-2011, 08:40 AM

70k in savings and 32k in debt? I'd be debt free tomorrow if I were in your shoes. The 32k even at .9% is losing ground to your savings account, most like, anyway - so long term you'll gain ground if you get debt free.

That's the DR way.

**mndtrp** · 08-30-2011, 07:13 PM

Pay off the student loan, and then reevaluate where you stand. If you like the feeling of having less debt, and still feel comfortable with your savings, pay off the car, too.